Yes, you can pay your federal income taxes to the IRS by credit card or debit card. Should you do it? Maybe. Here’s how it works:
When you file your tax return through an official IRS e-pay service provider (see list below), you’ll have an option to pay your tax bill by credit card or debit card now or schedule a later date. This payment is processed by the service provider and passed along to the IRS. You will not write your credit card on your tax return. The IRS will never see nor store your credit card information. You will then pay a convenience fee to the service provider.
There are obvious pros and cons to paying your taxes by credit card, most of which are already inherent to using credit cards at all.
Pros of Paying Your Taxes by Credit Card
- Convenience – You can send electronic payment by credit or debt whether you e-file or paper file. This saves you from writing out and mailing a paper check (does anyone still do this?).
- Deferred Payment – It’s a bit late now, but if you’re one of those nerds who files taxes early, you can schedule the credit card transaction for later so you don’t take that financial hit until you absolutely have to. Also, paying by credit card is an option for folks who simply don’t have the cash to pay their tax bills, though putting it on your credit card balance can quickly become a con (more on this later).
- Reward Points – If you’ve got a $100,000 tax bill (and some do), that can add up to a lot of frequent flyer miles. Rewards junkies should be pleased with this additional opportunity to rack up the free stuff.
- Security - The IRS uses the same credit card processing system as Macy’s or Target. As such, you’re protected by the same anti-fraud measures.
- Fees are Tax Deductible – It may be small potatoes, but every bit counts. You can deduct your convenience fee as an itemized business or personal deduction.
Cons of Paying Taxes by Debit or Credit Card
- Fees – The fees range from a low of $3.95 flat charge per transaction to a whopping 2.35% percentage of your total tax bill. With a $5,000 tax liability, you’re looking at a convenience fee of $117.50 – a high price to pay for saving a stamp.
- Higher Interest Rates – If you’re paying by credit card because you’re strapped for cash, you should be aware that there are some other options available. The IRS has an installment plan with interest rates as low as 4% (a sweet deal if your credit card APR is in the double digits) which you can get by filling out Form 9465.
- Card Rejections Can Lead to Big Trouble - If you don’t have the credit line or checking balance to cover your tax bill on the transaction date, it could lead to even more hot water. A rejected card can lead to a late tax payment which introduces even more penalties.
- Responsibility - If the service provider drops the ball for any reason and doesn’t get your money to the IRS, it’s your problem. Even though it’s not your fault, you’ll be responsible for any fees, penalties or other delinquent charges – so be sure you choose a third-party service provider that you can trust.
Don’t Get Scammed
Undoubtedly, the scammers will try to use awareness of this option to their advantage – so it’s your duty to be vigilant. To be safe, only use the providers officially approved by the IRS and never write your credit card information down on your tax return. Also, make sure you get a confirmation number – even if you complete your transaction by phone.
When all is said and done, take a look at your credit card bill. You’ll see two transactions: one for the amount of your tax bill and one for the convenience charge. The first will appear as:
United States Treasury Tax Payment
The second will be some variation of “Tax Payment Convenience Fee.” Don’t be alarmed if it’s something slightly different (i.e. the service provider’s company name). But do investigate if your tax bill and the convenience fee are lumped together in one transaction.
Ready to pay your taxes by credit card? Here’s a list of the IRS approved third-party service providers:
- Official Payments Corporation – Debit fee: $3.95/Credit Fee: 2.35%
- Pay1040.com – Debit fee: $3.89/Credit fee: 2.35%
- PayUSATax.com – Debit fee: $3.89/Credit fee: 1.95%
- FileYourTaxes.com – Credit/Debit fee: 3.93%
- TurboTax – Credit/Debit fee: 2.35%
Also note that these fees may change and that most providers have a minimum convenience fee of $1.00.
